This blog is used to post legal tips for businesses and consumers in California as well as commentaries on issues of interest to clients in the San Diego area. For information about our services, please contact us at (619) 448-2129. This publication is NOT INTENDED TO SERVE AS A SUBSTITUTE FOR LEGAL ADVICE. Please consult with a licensed attorney if you require legal advice. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Monday, October 31, 2005

In a recent article, I discussed the requirement that debtors with primarily consumer debt must obtain credit counseling prior to filing for bankruptcy. Debtors in San Diego County now may choose from 7 nonprofit agencies authorized to perform pre-bankruptcy credit counseling services for debtors. In many cases, the services may be provided via telephone or over the Internet. Here is the current list:

Credit counseling is mandatory for most consumer debtors prior to filing for bankruptcy. This article is not an endorsement of any of the agencies listed above and is for informational purpose only. Please contact us if you need information on our debt relief services.

We are a bankruptcy and debt relief agency. We help people file for bankruptcy. This publication is NOT INTENDED TO SERVE AS A SUBSTITUTE FOR LEGAL ADVICE. Please consult with a licensed attorney if you require legal advice.

What effect will the new bankruptcy laws have on the small business owner?

Probably a more major effect than before. My husband and I both own small businesses. In the previous years, we have always had clients that paid on time. This is the first year that we have seen the economy really effect people.

Small business owners have to worry about whether their customers are going to pay. How do you know if your customers are going to pay? Whether you are a new small business owner or been around for a couple of years, this is still an issue that comes up. Here are a couple of suggestions that should help with the foundation of your business:

1) Initially when you meet with a client, you state up front the payment arrangements. This could be whether you are paid COD, upon completion of a job or within a certain amount of time.

2) Once you have completed the first job or two, see how the client pays.

a) Did they pay on time?

b) Did you have to send them a reminder invoice stating they were overdue?

c) Did you have to repeatedly call three or four times? Then when you got the check it was returned for non-sufficient funds?

d) Did the client make good on the non-sufficient funds check?

This could possibly happen to you. The idea is to get clients that pay on time and even ahead. If you have a client you have to remind every now and then, that is acceptable as long as they pay. However, if you have a client that pays you late and the check is not good, you want to be wary.

This last type of client is not a client you want to keep or get more of. Why? In our situation, the client came to us a second time with a crucial job and really needed help. The first check they gave us they made good on. We completed a job for them and we were assured we would be paid. Then when it was time to get paid, the client's phone number had been disconnected. We did some research and later found out t hat this particular client was being sued by the building management where they had their office. In the end we found out that they had filed bankruptcy.

Looking back at the situation, we knew the first time when we had problems getting paid that we should not continue to work with them. However, the second time we were trying to be nice and help them out of a situation. Now, we are out of the money for doing that client's job.

As a small business owner, you cannot afford to have many or any clients like this last client talked about, they will send your business into bankruptcy. Take the time to know and understand your clients. If you have to ask for references from other vendors they have used, by all means do that. Another alternative for a new client is to have them pay COD until they have established a history of paying their bills. You will not have to do this with every new client. However, if you believe there is going to be a problem based on conversations you have with the client, you might want to institute such a policy.

Your small business might well be your livelihood and you cannot afford not to be paid. It is important to establish your policy up front in terms of payment. Do not let this be something you think is understood without verbalizing it. If one company ends up having too many clients filing bankruptcy on them and not paying what is owed, that company could potentially end up in bankruptcy as well.

About the Author: Dr. Taffy Wagner is the author of Debt Dilemma. Debt Dilemma is her own personal story of how she got into debt and was able to get out without filing bankruptcy. She will be launching a national marketing campaign on October 18, 2005. View her website at http://www.paidoff.net/SpecialPromo.html for further details.

Saturday, October 29, 2005

The link above is to a disturbing story about how the City of San Diego abused the eminent domain process to take a man's business for the "public purpose" of allowing a private developer to build a hotel. Ahmed Mesdaq bought a downtown warehouse and spend $2.5 million to open his Gran Havana Cigar and Coffee Lounge. The City of San Diego decided that this property was "blighted" and used its power of eminent domain to take the property, which will be used to build a Marriott Renaissance Hotel.

"Eminent domain" - also called "condemnation" - is the power of local, state or federal government agencies to take private property for "public use" so long as the government pays "just compensation." The government can exercise its power of eminent domain even if the owner does not wish to sell his or her property. Traditional examples of "public uses" for which the government might exercise its power of eminent domain include such things as schools, roads, libraries, police stations, fire stations and similar public uses.

In recent years, however, courts have allowed a much broader definition of the term "public use" to include nearly any type of public benefit such as "economic development" for projects that might generate tax revenue for local governments. In some cases, the developer of a proposed project will refuse to pay the seller's price and the local government entity that supports the project will step in and try to impose a lower sale price on the owner through the eminent domain process.

Mr. Mesdaq fought for two years to keep his business, but the struggle proved too much. In the end, Mr. Mesdaq hired San Diego attorney Vincent J. Bartolotta, Jr. to take the matter to trial to decide how much compensation should be awarded for the value of the business and the building. The jury awarded Mr. Mesdaq $7.7 million, which was 256% higher than the $3 million offered by the City of San Diego.

In 2006, California voters may get the opportunity to correct these abuses by local government. Sen. Tom McClintock is proposing a ballot measure to add a constitutional amendment that would protect Californians from seizure of private property through eminent domain. The amendment would require that the government either continue owning the property it seizes or guarantee the public the legal right to use the property. The amendment also would require any property seized to be restored to the original owner or rightful successor if the government ceases to use it for the purpose of the eminent domain action. Voters are strongly encouraged to contact their legislators to encourage them to support reform legislation to prevent any further abuse of the eminent domain process by local governments.

Friday, October 28, 2005

AccountingWEB.com - Oct-21-2005 - Member charities of the United Way of the Coastal Empire (Georgia) are receiving visits from volunteer internal inspectors during their fall campaigns, savannahnow.com reports. Denise Oberlin, an inspector, accompanied Patti Lyons on a food delivery for Senior Citizen’s Inc. and was told that three out of four of the people served by the Agency were below the poverty level. Lyons also told Ms. Oberlin that there were additional needy seniors in the area that the Agency couldn’t serve because they didn’t have enough money.

Ms. Oberlin was one of the 100 charity inspectors the United Way of the Coastal Empire has trained to make sure that the agencies receiving money from United Way are spending it effectively. Reviewers are trained in evaluating nonprofits and sent out in teams to visit the 38 member charities of the regional United Way.

Thursday, October 27, 2005

AccountingWEB.com - Oct-21-2005 - The Small Business Administration (SBA) released figures on its post-9/11 disaster lending program showing that $245 million of the total $1.2 billion lent is currently in default, representing a 20.4 percent default rate. More than 10,000 companies approved for SBA direct loans received a two-year grace period, between 2001 and 2003, to start making payments and now these defaulted loans are coming to light according to the Associated Press. Another SBA loan program, the Supplemental Terrorist Activity Relief program experienced a 5 percent default rate on $3.7 billion lent.

Tuesday, October 25, 2005

Unsolicited faxes, like unwanted phone calls and spam e-mail before them, have been the target of federal regulations. And now California is weighing in on the fax debate, applying even tougher restrictions to facsimile distribution in a bill recently signed by Gov. Arnold Schwarzenegger.

The new state legislation, which goes into effect Jan. 1, 2006, prohibits a person or entity from sending an advertisement to a fax machine without the recipient's express consent, even when the fax is sent to an existing customer.

Have you ever accepted a notarized statement or proof of identity as the basis for establishing an account or beginning a financial relationship with an individual or organization? Do you know that numerous rubber stamp companies will make up a notary stamp for anyone with a copy of the stamp for them to work from? Usually the cost is about fifteen dollars! Instead of a notarized copy or statement, ask for a reference from another know financial institution that you can verify directly with that institution. A notary stamp is worth about as much as the paper it is printed on!

John Kammin was a professional identity thief and now assists law enforcement and banks regarding how to protect themselves. For more information see www.TheProsAndTheCons.com.

Friday, October 21, 2005

Taxpayers who suffered losses resulting from Hurricane Katrina are being advised by the Internal Revenue Service (IRS) to be aware of recent changes in tax law providing for tax-favored withdrawals, reconstitutions and loans from certain retirement plans.

Highly paid wage earners will notice a moderate increase in the wage base on which Social Security taxes are due in 2006 according to a statement from CCH Incorporated. An estimated 11.3 million workers will be affected by the wage base increase.

The Social Security Administration announced a 4.1 percent cost of living adjustment for more than 52 million retired and disabled recipients last week. Checks will increase an average of $39 starting in January. This is the largest increase since the 5.4 percent advance in 1991. Last year's increase was 2.7 percent.

Wednesday, October 19, 2005

On September 29, 2005, Governor Arnold Schwarzenegger vetoed Assembly Bill 48 which would have raised the minimum wage in California to $7.75. This bill would have increased the minimum wage to $7.25 effective July 1, 2006 and to $7.75 effective July 1, 2007. Beginning January 1, 2008 and each January 1 thereafter, the minimum wage would have been automatically adjusted to keep pace with the rate of inflation.

In his veto message to the legislature, Gov. Schwarzenegger expressed support for increasing the minimum wage. However, he also stated that automatic increases to adjust for inflation failed to "account for changes in the economy which could have deleterious effects on the economic health of the state." Gov. Schwarzenegger also called the automatic increases an abdication of the legislature's duty "to consider all of the impacts each increase to the wage will have on workers and businesses."

I agree with Gov. Schwarzenegger's sentiments on the issue of automatic increases. The vast majority of economists believe the minimum wage law already costs the economy thousands of jobs. When you force American companies to pay a certain wage, you increase the likelihood that those companies will outsource jobs to foreign workers, where labor is much cheaper. Non-profit charitable organizations are hurt by the minimum wage. Increasing the minimum wage can drive some small companies out of business.

While vetoing the minimum wage law may seem heartless to some, it will likely preserve the jobs of many who might have been put out of work had the law passed.

Sunday, October 16, 2005

At age 85, the last thing Virginia Norwood needed was to file for bankruptcy — during the past year, her husband died of cancer and Norwood and her daughter have struggled to hold on to their Dallas home.

But on Oct. 1, Norwood filed for Chapter 7 bankruptcy protection, a move that stopped the house from going into foreclosure and allowed Norwood and her daughter, Shari Murphy, 49, to stay afloat.

"I do not know what to do. And I'm very strong, that's what they told me at the hospital. They told me I was the strongest person they'd seen," Norwood said.

"We had to do something," said Murphy, an electrician who, after a back injury and two ensuing surgeries, has had a hard time finding a job.

As of Monday, people with financial plights like Norwood's face a bigger struggle as a new federal law takes effect and places limitations on personal bankruptcy filings. Two age groups, debtors under 35 and those over 65, are expected to have a particularly hard time under the law.

For young people with jobs, it will be probably tougher under the new law to qualify for Chapter 7 bankruptcy, which would wipe out much or all of their debts. For the elderly, a group badly in need of debt erasure, higher legal fees are likely to be the big disincentives.

Legal fees for Chapter 7 bankruptcy now range from as low as $500 in some parts of the country to as high as $2,500 in metropolitan areas like Chicago and Los Angeles, said lawyer James Cossitt, who conducted a national attorney fee survey. Experts estimate that these costs will double under the new law, and older debtors already struggling on limited incomes will be hard-pressed to come up with that money.

"It's creating a lot more hoops they're going to have to jump through," said bankruptcy attorney Kevin Chern, president of Start Fresh Today Inc.

The Congressional Budget Office said in a report, based on a projection of 1.6 million Chapter 7 and Chapter 13 bankruptcy filings in 2007, that the direct cost of complying with the new law will be between $240 million and $800 million, and "some of the additional costs incurred by attorneys would most likely be passed on to their clients" — including the elderly.

The law's supporters say its aim is to weed out big spenders who are trying to take advantage of the bankruptcy system. To qualify for Chapter 7 bankruptcy under the new law, debtors will have to pass what's called a means test — if their household incomes are higher than their states' median incomes and they're able to pay $6,000 over five years, or about $100 a month, they'll have to go into Chapter 13 and face a court-imposed debt repayment plan.

That will make it harder for debtors seeking a fresh start.

"It's probably younger people who may see the law change more substantially," Chern said. Although under-35 debtors are often burdened with as much debt as older people, their income is higher and living expenses lower — most have jobs, health, a chance at upward mobility, and many have no dependents.

Chris Chung, a single 34-year-old in New Jersey, was one of hundreds of thousands of Americans who rushed to file for bankruptcy before the new law took effect, fearing he may not qualify for relief under its provisions.

Chung is more than $40,000 in debt after two years of unemployment. He recently got a new job, but the debt's still there.

"I tried to keep up with it, but it became near impossible," Chung said.

Ashleigh Anglemeyer, 25, who recently remarried and gave birth to a second child, also rushed to file under the old law. She has about $16,000 in credit card debt from her previous marriage."I just want to get rid of it and start fresh," said Anglemeyer, a legal assistant who bought a do-it-yourself bankruptcy kit to save on fees.

Opponents of the law say it hurts younger Americans in another way: It will discourage them from trying their hands at entrepreneurship.

"A young entrepreneur opens a bagel shop, but it's in the wrong neighborhood. Guess what? He'll have that on his head for the rest of his life, and never be able to get back on his feet," said Gary Norgaard, president of the New Jersey Bankruptcy Lawyers.

Officially, only about 2 percent of bankruptcy filings in 2003 were business bankruptcies, but law professors Robert M. Lawless and Elizabeth Warren estimate the figure is closer to 17 percent. A big reason, they wrote in an article for the California Law Journal, is because many personal bankruptcies are actually due to business failure.

Robert Werner, now 63 and running a business called Proud Pappy's Pretzels, filed for bankruptcy in the 1980s when another business venture failed. He was hundreds of thousands of dollars in debt, and while bankruptcy destroyed his credit for several years, it was the only way out, he said.

The law isn't expected to affect the ability of most senior citizens to qualify Chapter 7 bankruptcy, because most are retired and the bulk of their income comes from Social Security and pensions, which won't be counted as part of household income.

"If a person had a lot of medical bills but not much income, the system would work for them," said Nathalie Martin of the American Bankruptcy Institute.

According to the Consumers Union, 85 percent of elderly debtors cite medical or employment problems as the reason for bankruptcy.

Norwood, for one, didn't want to file for bankruptcy, but she said that it was a last and necessary resort.

"At 85, you realize that time's running out," Norwood said. "I just want some peace while I'm still here. What do I need materialistically? A place to eat, a place to sleep, to know that my bills are paid."

Monday, October 10, 2005

The following state was issued today by San Diego City Councilmember Jim Madaffer:

Today my attorney, who is himself a former SEC attorney, sent a letter to the City Attorney documenting his singular lack of qualifications to represent the City of San Diego in matters relating to the Securities and Exchange Commission as well as glaring omissions and lack of regard for the facts in his interim reports.

The purpose of our letter is to list the many facts that the City Attorney has conspicuously ignored and to provide a cogent analysis of those facts as they relate to the City Council. If he is going to be serious about representing the City and trying to resolve the pending investigations, then he needs to tell the whole story and leave out the politics.

The City Attorney’s unfounded allegations about the City Council and polarizing reports have not helped the process. If he intends to assist in resolving these matters, he has to get his facts straight. Most of his efforts to date have been a waste of taxpayer dollars filing lawsuits without merit and polarized the City with his politically motivated and misleading reports. He has done nothing to help the City get past its current quagmire.

What has been lost in most of the daily discussions are these three important, related issues that must be done in this order:

To allow the audit committee to complete its investigations. They are hoping to be finished by the end of the year.

To get our audited financial statements completed by KPMG once the audit committee has completed their work.

To get back into the bond market once KPMG has completed our audits.

Below you will find the link to download the letter from my attorney, Mr. Thomas A. Zaccaro.

Effective July 1, 2005, residents of California have much greater access to information regarding sex offenders as a result of changes to the Megan's Law legislation originally passed in 2004. The substance of the original sex offender registry law itself did not change. The new law simply mandates easier access to the data on the registry by requiring the establishment of a Department of Justice sex offender web site. Previously, local law enforcement maintained a public access data base and the Department of Justice operated a "900" number.

The public can now access a database with specific information on tbe more than 63,000 persons required to register in California as sex offenders. Specific home addresses are displayed on more than 33,500 offenders in the California communities. An additional 30,500 offenders are included on the site with listing by ZIP Code, city, and county. Information on approximately 22,000 other offenders is not included on this site, but is known to law enforcement personnel.

Sunday, October 09, 2005

A recent article in the San Diego Union Tribune addressed the problem of officer within the San Diego Police Department. SDPD officers are leaving for greener pastures with other local law enforcement agencies. According to the Union Tribune, the City of San Diego has reduced the monthly take-home pay of San Diego police officers by an average of about $450 per month as it attempts to pay off a pension deficit of at least $1.4 billion. Some of the money goes toward retirement accounts, some helps pay for medical coverage.

This complicates an already serious problem regarding the lack of officers for SDPD. Currently, the city’s ratio of officers to citizens languishes near 1.6-to-1,000, one of the lowest in California and the nation. The average national ratio for a similar sized city is 2.2 officers to 1,000 citizens. The department would need to hire more than 110 officers a year for the next six years just to maintain the current substandard ratio.

In recent months, allegations have been that the San Diego Police Department has been manipulating crime statistics for political purposes to make it seem as if crime is down in San Diego. Instead of refusing to act on citizen's arrests to keep crime statistics down, it would more logical that the SDPD would want to inform the San Diego City Council of the true nature of its situation so that more funding could be made available to hire more officers.

The police department is not the only San Diego public safety agency that is vastly underfunded. San Diego’s firefighter-to-citizen ratio is currently .69-to-1,000, and experts say, like the police ratio, the figure is realistically much lower. Most other cities the size of San Diego have a 1-to-1,000 firefighter-to-citizen ratio.

It is vital that the City Council take ownership of the pension problem and work quickly to address the city's financial woes before the city's resources are stretched to the limit by another disaster like the October 2004 fires.

Thursday, October 06, 2005

The link shown above is to a local news story about a young man named Johnathan Tate. Mr. Tate alleges that he was assaulted by mall security at Parkway Plaza in El Cajon, California. Mr. Tate is fond of his "goth" clothing and was apparently wearing a colored bandana that could signify a gang affiliation. When Mr. Tate refused a request my mall security to remove the bandana or leave the premises, he instead sat down as if he was a war protester from the 1960's. Security placed him under citizen's arrest for trespassing. While Johnathon Tate is technically a teenager in that he is 19 years old, he is also an adult that should take responsibility for his own actions.

An owner of private property such as a shopping mall has the right to make rules and regulations regarding the use of the property. If a shopping mall owner wishes to ban colored bandanas because of potential gang problems, that is well within their prerogative to do so. Mr. Tate had no right to disobey an apparently lawful request for him to leave the property. From the facts described in the article, it appears that he resisted a lawful citizen’s arrest for trespassing.

Perhaps the most amusing part of the whole article was when the family consulted Andre Zeehandelaar, described as a “retired” attorney. Mr. Zeehandelaar isn’t retired; he was disbarred by the State Bar of California for unethical behavior after less than 10 years as an attorney. In a battle of credibility, I think that mall security would prevail over Mr. Tate and his “retired” attorney.

Monday, October 03, 2005

San Diego Deputy District Attorney Terri Perez and the San Diego Sheriff's Department are doing a great job in empowering the Vista community as well as combating gang violence. Recently, Perez won a court injunction which prohibits gang members from gathering in certain areas. To view Fox News footage of this injunction, click here.

It would be nice if the County of San Diego could obtain a countywide permanent court ordered injunction prohibiting gang members from gathering in a public place such as schools, parks, shopping malls, stadiums, theaters, etc. Interestingly, some argue that gang members have rights that we must not infringe upon. It would be nice if law abiding citizen’s rights would supersede that of the criminal elements that are destroying neighborhoods.

Last year, San Diego Police obtained a similar injunction targeting the Skyline area. The problem with the Skyline injunction is that it only prohibited gang activity within their own neighborhood. This resulted in the gang members relocating to other areas of San Diego such as the Mission Valley area. Shortly after this injunction, there were several gang shootings involving the Skyline gang in the Mission Valley area.